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Monday, February 6, 2023

Automotive supplier: Continental increases sales significantly

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Continental presented key data and then achieved its revenue and profit targets. However, things are not going quite smoothly for the Dax group, although the core business with tires performed slightly better than expected.

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The automotive supplier and tire manufacturer Continental significantly expanded its business again last year – but remained under pressure due to high costs. According to preliminary figures, sales increased by around 17 percent to 39.4 billion euros, as the Dax group announced. However, the margin before interest and taxes adjusted for special effects was probably 5.0 percent, 0.6 points below the previous year.

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The company from Hanover warned early on that additional costs for energy, freight and material would run into the billions. With the figures, Conti achieved its revenue and profit targets – but clearly missed the plans for the cash inflow (free cash flow), which is important for investors, because noticeably fewer payments ended up in the accounts before the reporting date than expected.

Ultimately, the group generated a total of around 200 million euros in financial inflows before deposits and payments for the purchase and sale of parts of the company. The management had recently targeted between 600 and 800 million. The fact that Conti made up a lot of ground in the fourth quarter was no longer enough. After hours trading on the Tradegate trading platform, the share was 1.1 percent below the Xetra close.

Auto supply under pressure – tire business stronger again

Continental has recently struggled, especially in the automotive supply sector, because global car production has repeatedly stuttered as a result of parts shortages and Chinese Covid lockdowns. In the past year, the environment finally improved. In the fourth quarter, the supplier division was operationally in the black again – but over the course of the year, slight losses are likely to have occurred again.

The group’s profit maker, the tire business, even performed slightly better than expected – and thus made up for weaknesses in the margin in the Contitech division’s plastics technology business. There, increased production costs, an unfavorable product mix and Covid restrictions in China had a negative impact.

Conti has not yet provided any information on the net result with the key data. After nine months, the group had accumulated a loss of 216 million euros, mainly due to high depreciation. The group will inform investors with the detailed annual figures on March 8 whether the final quarter brought about a turning point.

Basically, the company distributes between 15 and 30 percent of the net profit. In previous years with red figures, Conti had already deviated from the dividend policy and had nevertheless paid a dividend to the shareholders. Conti’s largest shareholder is the Schaeffler family of industrialists with 46 percent of the shares.

Source: Stern

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